tv Squawk on the Street CNBC March 4, 2019 9:00am-11:00am EST
all right, make sure you join us tomorrow mike, wolf, thank you for your time right now time for "squawk on the street." good morning and welcome to "squawk on the street. i'm david faber with jim cramer. we are live from the new york stock exchange carl is on assignment this morning. let's give you a look at futures as we get ready to start the trading week a half hour from now. you can see generally going to be a higher open judging from europe at this point also things have been moving in largely positive territory let's get to our road map this morning. it does start with trade optimism as you saw, stocks are set to
rally at the open on reports that the u.s. and china are in the final stages of talks that could reach a deal before the end of this month. media shake-up at&t's warner media announcing leadership changes renewed focus on content development. we'll discuss and give you some insight there. and then there were five tesla set to debut the latest electric car model next week shares, which were down sharply on friday, are rising in the premarket. sources telling cnbc that the u.s. and china are in the final stages of discussions that would won colluconclude at the f this month on friday, the dow's weekly win streak snapped at nine while the s&p 500 closed above 2800 for first time in about four months. certainly the prospect of a deal between the u.s. and china getting near seen as a positive, though you and i think it both
argued the downside would be far greater were there not to be a deal than the upside at this point. though there may be those disappointed at least in these reports that we're getting, both cnbc and the journal and the times, talking more about dollars and cents as opposed to real changes, structural changes that will be in the agreement or lack thereof, i should say, in any final agreement in terms of how the chinese allow u.s. companies to operate there and, of course, the key that you taukd abo talked about all the time, intellectual property. >> you need to see something concrete more than just this time, $18 billion energy deal before, it was soy >> that was interesting. >> you can't even -- >> they have to build a bunch of new trains, right? >> have to start using telurian,
cheniere is sold out i don't know what that is. we're going to use cheniere to -- >> we have free port, which i know as well. >> important we're sending out 5% of our natural gas. but there is no shortage here because we have much more than we need. but we don't have enough pipe. what i thought was interesting is that they talk about the idea that the joint venture will go way. we're looking at american express or mastercard or visa being able to go, $6.8 billion -- 6.8 billion credit cards in china and we would like to crack into that market. i would like to see that apple is trading up. up 50 cents last night now moving up a dollar people feel apple will be a beneficiary of the europe good feeling, micron. i think there is a -- half the people want to see and sell the news, before the news happens, they want to get ahead of the people who are going to sell the news and the other half are saying, wait a second, this could be substantive for some of our -- >> it could be, but on that part
it is very difficult to know until we really see a final agreement. and then as important i think and lighthizer made this point in his testimony, in the hearing, how you hold them to whatever it is you agree to. >> there is this talk of being able to instantly -- >> reinstate tariffs >> that was interesting. david, look, there is the tariffs have fundamentally altered the reliability of dealing with china i think china is some of the numbers are indicating that things are obviously not that strong there is an upgrade of hasbro. i've been thinking since i talked to brian goldiner, he's trying so hard to have less china, make fewer -- toys are made in china. that's one thing that china excels at. that's what i think the chinese are worried about is the run on the factories, so to speak how much american business is being taken away and that's what the chinese -- that's the biggest chinese fear. >> do you think there is the possibility that those who are
more hawkish on this, and there are plenty of them, and i wouldn't even say they're necessarily -- some people say on the conservative side, but not really, sort of actually interestingly both sides, do you think that pressure might get to trump, who is known to sort of change his mind, as we know, and that things could get derailed if people don't feel that what we're being told is going to be that final agreement is not going to include enough of what you're talking about, concessions on the structural issues in the chinese economy. >> i think that's a little too sophisticated for the average hedge fund at this point i think the average hedge fund is saying, wait a second, this guy is mercurial, we thought there would be a north korean deal and walked that back. is this a strawman, this deal? he walks away from it because he's not happy with the intellectual properties. if there is a -- let's say we get a -- an interview off the record interview done by the hard camp, it is even harder
than lighthizer. then what happens? people say i just bought, you know -- >> not to put you on the spot, i will, of course, i always do what kind of downside percentagewise if this were to fall apart as little, given what is a fairly low percentage chance, but what would the downside be? >> substantial half the rally put on the backs of the fact that jay powell switched his position. and i would say probably half of it is -- when domes to the industrials, 40% of business done overseas. half of it off the belief that china will be better semis are almost entirely related to china so you lose that loeadership group, will you default to health care? domestics have been abysmal during this period i think it is important. i think there has to be a deal i hate to be dire about it if he walks away, the president walks away right now, you would see -- >> i'll tell you, jim, there are
plenty of people who say he should walk away, it was not worth this fight if you're going to end up with a largely an agreement that says we'll lower tariffs and we'll buy more of your stuff that's not enough. >> it is supposed to be roll back of the 2025 -- i call it the world domination, but made in china play. the made in china means, listen, we can cut out -- there is another that says they have to do intellectual property because they themselves have a lot of intellectual property they don't want stolen. >> or more as they -- >> a serial stealer of intellectual property. i just, look, it is a little more precarious and that'sy think that you don't have stocks up huge. i watch the futures start last night. they started trading about three hours after the journal story about how there is going to be a deal and i thought the futures would open up huge and they didn't i think they didn't because people just don't believe or they think the president is too me mercurial to bank on he's at the meeting this weekend, for conservatives
and he starts talking about how the fed favors the strong dollar, which isn't necessarily true but we know his chief economic adviser has been on record for multiyears here at cnbc as favoring king dollar so i kind of struggle over the idea, you got the chief economic adviser favoring king dollar and here is the president trashing jay powell because he favors a strong dollar. and it begins to feel a little sitcom-like. >> yeah. maybe if it was -- >> jay powell, he's a bystander, he's done everything the president could want and yet he still is ridiculed. >> he is >> he's ridiculed. >> not letting go. >> no. let's move on to some news we got at the top of the hour from at&t it has been, of course, reported on already, but they did make it official at at&t sort of a broad ranging reorganization of the old time warner in terms of leadership positions. and as expected, of course,
richard plepler runs hbo, david levy returns turner, both leaving the company. the new management team, entertainment going to be led by bob greenblatt that will include, of course, hbo, the cable networks, tnt, tbs, trutv and the direct to consumer business and that's an important effort under way here as they at time warner also develop their own direct to consumer offering. mr. greenblatt charged with figuring that out and getting all that together. hbo already has a key direct to consumer offering. but you're going to add a lot to it over time and they're going to roll that out, i think, back half of this year is the potential plan jeff zucker, our old boss from years back, will now take control of all live programming at at&t/time warner. he will now have warner news and sports, cnn worldwide, bleacher
report, my son loves that one. they got so much news on that thing. at&t's regional sports networks, remember those we'll get back to disney sale of its regional sports networks one of these days. and kevin will keep what he's got and they're going to expand, jim, sort of their kids' programming at least across their different properties with an idea towards having something that is focused on kids and animation efforts across warner media, of course talking cartoon network, adult swim, boomerang and all the films and games. a lot of this stuff was sitting there waiting to happen. and a lot of it was delayed in part because the u.s. government chose to challenge at&t's purchase of time warner. last week that it finally got completely eliminated as a risk when an appeals court ruled that they upheld essentially judge leon's ruling that it was not anti-competitive
but it will be interesting this is the company you and i pointed out many times with $180 billion in debt, levered at three times at the merger close, and they want to get that down this year to 2.6 times and reduce debt to about $158 billion, and part of that is key to producing more ebitda from these assets >> well, david, it seems to me that, when i read it first, i said, our own boss, mr. zucker, seems like the winner, then i started thinking, david, was there -- there was always this worry and you put it in our heads, these are tell coe guys, they're not artists, so to speak. they're not journalists. i always felt there has to be people who are very uneasy about working for telco guys >> it is true. but there is that. and that is always going to be a potential risk that some see that said, greenblatt is not a
telco guy. john stankey, their boss, yes, he is. he seems to have people put in place. as not as though the business shouldn't necessarily be organized differently. the world is changing so rapidly, you could make an argument that they actually have been held up for making some of the changes they might otherwise have as they waited to make sure that they had all the approvals they needed and won in court stankey, by the way -- >> they come in with very different business model, they save a lot of money. a lot of people at cbs who ended up saying, these guys were -- they didn't understand the nature of it the nature of journalists. at that point, verizon buys -- they buy yahoo, okay >> yahoo and aol those are tiny deals this is the most significant --
this is an important component of the overall cash flow, the overall -- >> did they solidify this. do they take -- does stankey take control and say, guys, i'm looking and i see you spend $50 million on tna i think they spent -- >> it is not under armour. >> what are you implying but, i'm saying that this is an industry that has not had the roi discipline of what i think that a randall stephenson expects. how about the left/right thing >> it will be -- it is always interesting to see and this is a -- almost a bet the company kind of a deal, right? you're not talking about a small deal that verizon did, creating this oath that has not worked. doesn't matter. >> they're not buying switches and routers. zucker doesn't know the router business.
>> to be fair to them, stankey put his people in place, he's got a strategy they're going to execute on by the way, they spend $12 billion on content overall at this company they're not talking about cost cutting. they're talking about reallocating, but not cost cutting. >> you're in a meeting with randall stephenson, you come up with the $12 million budget. >> that's everything that's movies, that's cnn, news gathering, everything. >> $12 billion we're having a tough quarter >> yeah. >> $8 billion. >> no way. >> why >> because, we'll fall apart. >> i don't care. we'll get carriage we'll do whatever it is. over the top i'm just saying it is not the kind of conversation that you would expect -- they're not talking to brian roberts, excuse me, randall stephenson may have an idea that that number is too high cut a couple billion out of that cnn thing. station everybody in front of the building >> you know what, i certainly can't say that that's not a
possibility. seems unluikely to me as a strategy to follow when you need to generate more growth. if we look at our friends at kraft heinz, a completely different company and completely different business, but they did actually cut, cut, cut and didn't invest, invest, invest. and eventually it catches up with you. >> what do we do with directv? we're in the meeting with the show >> we're going to focus on directv now. we're going to focus on getting good subs there. slowly watch it decline. but we're going to -- we're going to invest in a direct to consumer business that is going to ultimately be successful. and, by the way, be successful enough to engender growth in our old core business, wireless, potentially. >> okay. the meeting is not a bad meeting between the entertainment guys and telco guys. >> that happens in john stankey's mind he's both now. >> do you think the telco guys say how do i program this hbo? >> no. >> that's all i need to know.
>> i don't think so. we'll end this with a quote from mr. stankey. he said at a time when we must shift our investment focus to develop more content for specific and demanding audiences on emerging platforms, we can't sustain a model where we invest one dollar more than necessary in the administrative aspects of running our business >> that's my guy that'sny g my guy. behind the scenes, that is what we talk about. >> can you keep generating more cash $26 billion, $14 billion to dividend, free cash. how much of that can be used to pay down debt? because if you don't and don't get the numbers up, there is going to be a reckoning and it won't be pretty. >> basketball? >> nba is really hot, yeah coming up, news involving a tesla vehicle launch that is giving the stock a bit of a lift this morning let's give you another look at futures. 14 minutes until we get started with trading here at the new york stock exchange.
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at the same time children's place announces comps that are, well, let's say that they're producing numbers where you're getting a loss in first quarter and they guide down from 777 to 5.75 they bought the gymboree intellectual property and crazy 8. i only know crazy 8 from "breaking bad. what is incredible to me, this, again, is the -- of the mall stores jcpenney call, they have to close a lot more stores. gap, they're closing half the gap stores this is hurting everybody in the reits. they're just getting crushed tanger factory outlet, they've got some this is emblematic of when you, like dick's, when sports authority closed, there is a flood of inventory. >> foot traffic what is the issue? >> we need more. we need more this is what is happening. if you think about what happened with toys "r" us and the food chain, they went under. >> every time you want to seize
on this as an overall theme and say i can short almost all of them, a foot locker comes along or i don't know, you're like wait a second, i thought the mall was dying. >> my stock trading was going to be foot locker i'm going to save it there is great stuff about foot locker a fellow from vertical -- pivotal -- i won't mention his name, what he did was he put a short out on foot locker and said the worst call of his life and went long. anybody who is that humble i like but you're right every time you try to short one of these, they crush you and it is too dangerous. i thought children's place was having a great quarter look at this crushing. >> yeah. that's -- >> so, you're right. gap -- >> brutal move. >> people are so against what art peck is doing, the analyst they think -- shuffling the deck chairs they need a good tool and dye man. >> change your dye >> i couldn't agree with you
got to be costco >> we got an opening bell coming up and a lot more to talk about here never did get to tesla we'll talk about that stock, of course looks a little -- >> new tweets. >> newmont tells barrick to go pound dirt >> unbelievable. your world is weird. and biogen ds oea deal. >> we'll get that as well. back after this.
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you're watching cnbc's "squawk on the street. we're live from the financial capital of the world we're going to get an opening bell in about two minutes from now. this is the time when i turn to my co-anchor and ask, well what is the key to this market? also, haven't talked oil at all, which has often been a key to trading. >> yeah. oil is coming back, which is going to drive the futures up. david, i'm getting the -- starting to believe the key to this market is amazon. faang is coming back makes no sense at all. remember one of the reasons we like faang is because there was no china amazon, amazon no china. analog, obviously. facebook, no china, right. netflix, no china.
alphabet, no china that group started outperforming on friday. amazon if you read through the grocery stores, they bought whole foods, not even what they're using. they're going to open groceries writ large kroger, i find that you want to watch that, because that stock had been going down because of issues that i think are very extraneous, including a story written by the new york times about jeff bezos and his hollywood style. this means nothing to me >> it doesn't? >> no. >> in reading that story, which i think didn't deliver as much as it perhaps had promised with the headline -- that said, it did make me think about investors thinking aboutthat's k has been held down. >> and given if he is someone that is distracted or focused on other things. >> andy jassy on mad money who
runs web services, he ain't distracted and brian orlofsky, he's not distracted if anything, everyone has rockets that they're doing, rockets seem to be a distraction. >> maybe he could go across the river to queens and get that deal done. >> if you bet against bezos, you're sorely mistaken >> there is the opening bell you heard it, of course. a look at real time exchange back at our headquarters going to be a lot of green on that board as you might expect given what futures look like at the big board, amplify etf celebrating the launch of its black swan growth in treasury core etf. >> okay. >> look into that one. >> over at nasdaq, the national association for female executives where do you want to start >> i think that it wouldn't be such a bad idea to talk about retail we had a bunch of retail -- a
bunch of retail that will be reporting. but this group has been red hot. based on what happened with foot locker and what i wanted to talk about with foot locker is goat and stock x. >> greatest of all time. >> no, the hundred million dollars that foot locker put to the goat exchange, which is trading sneakers, stock x is owned by dan gilbert, one of the smartest people in the world, quicken loan and put 1,000 people to work in -- >> owns a lot of detroit. >> put a thousand people to work -- he owns stock x. it is the secondary market in sneakers that tells you how strong foot locker really is these are limited edition nic i nikes but also adidas, this is something your boy knows more about than we do like be certified. this is this whole underground of retail. if you thought that foot locker was just a mall store, think
again. i think these two exchanges, stock x, did a gigantic round of financing and goat are the way of the future. a limited number of property out there and people basically treat it like stub hub, like ebay. so i'm watching this group and thinking that nike is going to 100. nike has for more game than people realize you have a china deal great for nike europe has never beened about for nike united states is on fire for nike i think that nike is the apparel story that is going to $100 and such a buy here, it is actually just waiting for people to grab. waiting. nike my favorite stock of the dow >> of the day. >> of the day. of the day. >> that's a whole 24 hour day or just -- >> no. don't hold me to that. there is a second session that starts around 1:30 how is your favorite at&t doing? >> it is down a little bit, at&t, actually, bucking the
overall market >> are they going to cut the -- >> they're going to cut jobs they're going cut jobs that seems to be part of this. they're not discussing that. >> this is like the bristol-myers celgene, i don't want to make light of this, this is a huge story. at&t is still a vastly overowned stock that could be the fulcrum -- you have people say listen, worry about junk debt, should be worried about -- black swan, black swan the black swan may be at&t if they can't get directv pulling out of the tail spin. >> i don't think people expect they're going to be able to pull it out you lose the amount of subscribers they're losing at directv on a quarterly basis, it is hard to imagine by the ay, to be fair, dish is also losing significant subscriber subscribers. that's where a lot of the cord cutting is taking place. the key for them is just going to be to continue, and by the way, directv now subscribers down last quarter. and 391,000 loss of directv.
>> that's unbelievable how many people are pulling out. >> the key is to increase ebitda, to generate growth using the direct to consumer for example and that's going to be an important strategy. by the way, there are a lot of companies we're going to be very focused on the success of the direct to consumer strategy. time warner is one of them disney is the other. >> how is is the april meeting going to go. it acts so well, i feel like there has to be some good feeling going on with espn plus, which i can't live without. >> you can't >> no. you get a guy like -- you get bryce harper, from philadelphia, you want to know everything about bryce harper you have to do espn plus if you're interested in the combine, all the good stuff i think is being held to espn plus it is for younger people who are really into -- same fantasy plus sports betting, younger than me, espn plus is just a must but i don't know whether it is enough to make it so they don't
have a good story in april >> i think at the investor meeting you're referring to, which is coming up fast. i believe they'll introduce the app itself so you'll get a sense as to the interface and what that is going to be like it is going to be a real focus for investors. so far many investors in disney seem to be looking past the next year, the investment year. or even two years and the delusion that is going to result as a result of the increased expenses, the decrease in what they're taking in from royalties when they pull their programming from other platforms and willing to say, all right, lead us to the promised land. >> no one gets that pass other than bezos and amazon. you're telling me iger will be able to get the pass. >> it seems like there is a willingness to -- don't you think? wouldn't you agree >> i'm giving the pass, absolutely i like, by the way, he's in bed with the nba, which is fantastic. i don't think that, you know, we
have to be doing more on the resurgence of that sport by the way, the nba, i should have gone over it, part of the resurgence of nike i don't think the people in china know who jordan is how would you know who jordan is i think that jordan means to them buy i think that's -- >> yao ming, remember him? >> a tall fellow. >> cheniere energy just to change it up, going to be up. >> is there anything for -- >> i think i see at 67 bucks, up $3 on $64 stock. >> they don't have -- >> we have it open there i don't have it open on my system that's a lot of money. >> i think that what people are -- >> a lot of natural gas. >> this is what people don't understand about the 18 billion. if you look at the southeast portion of our country, there is a tremendous amount of money,
biggest construction jobs in our country right now are lng, call them trains, to move lng away. a lot of people felt there would be oversaturation given the fact you have an incredible dominion, fantastic plan, you got cheniere, so we're thinking that the other few would be, like, free port, maybe they wouldn't have enough customers or the new one that shareef is doing. now we know that's not true. if the president be with for more granular, he would realize the way to be able to break the whole gas prompt is cheniere the way to get the natural gas which we flare off rather than actually transport -- >> geopolitical aspect to it as well >> i wish -- >> you can lessen the influence of the russians by the great deal in natural gas -- these are jobs that involve welding. you use the term, you don't need
to go -- president obama wanted everybody to -- >> you can go to texas and cut hair and make is 150 grand a year. >> unless like me. i got the guy who did it and said can you fit me? >> what did he charge you? >> 40, i flipped him 20. >> 60 bucks for that >> no, a good guy. has to make his represent. you think i flipped him too much. >> that's very generous. nice of you. >> newmont barrick, newmont says no, no, no >> we're not interested. >> we're going to continue to follow our path right now, our chosen path that is our purchase of goldcorp. we believe that will provide as much as, oh, at least $4.4 billion of value creation. barrick has been trying to get the investor base, newmont, to come to its side they did it with an initial bid that was below the market price essentially. hoping that investors will be
very focused on the synergies of the two companies, particularly as it relates to nevada. and the ability to put their two operations together and to save an enormous amount of money in that state that said, newmont said, come on, really you're going to make us an offer that is below the market price and right now mark bristow and management team at barrick don't seem to be budging and they're just saying, your proposal would deliver less to our holders than our current deal to acquire goldcorp they're trying to sort of put out this idea, we can just go with jv, put a jv together with our nevada properties and that will be fine we'll see how this develops, jim. but did want to report that newmont sport unanimously determined that the unsolicited bid from barrick is not in newmont shareholders' best interests. >> it will be the shareholders who decide >> i like the idea that what
bristow is doing is he's getting away from the volatile government situation he had a situation where suddenly congolese government is saying, you're not paying us enough, the big wrap against randgold was that he only worked in the situations in the countries where gold was easily accessible, but the governments were unstable. so you get this mixture and you get a higher price earnings multiple most gold stocks don't trade on that bristol believes in the dividend, believes in the price earnings multiple. likes to look at his company like an industrial company this is a deal that must be done in order to make it to a higher -- >> they are laying it all out there at barrick saying it is all about our ability to manage this company better. and basically take advantage of a billion -- 7 billion in synergies or whatever the number was. a billion a year we'll see. tesla, which we talked about, at least saying we're going to talk
about, we vice president tahave let's talk about it. stock is barely up there has been continued coverage there has been continued coverage of their decision to get out of the showroom business, so to speak, and sell all of their cars online, which really has not been done by anyone before. but a lot of things tesla has done that nobody else has done no other company has done. >> those of us who have been to a tesla showroom, i've been to a bunch of them, if there was anything that went wrong with the car, you knew where to go. i don't know that network, we were convinced from musk that the network was important. and now we're being convinced that it is not important but car vanna for used cars, we talked about it online, the world is changing. this next generation, david, i refer to next generation, they like to buy cars with this
this is like -- >> just call a car with that isn't that really the bigger issue? >> i said, you know what, i know how to use uber. >> how did it go did it work? >> black suv came in two minutes. whole thing was very satisfying. >> was it? >> well, the guy had a cold. >> a cold? >> he had a cold >> speaking of colds, biogen announced it is going to acquire nightstar therapeutics >> yes, how do you like that >> clinical pipeline of gene therapy candidates and ophthalmology, 22.50 -- excuse me, $25.50 in cash >> i said -- >> the premiums in these smaller deals by big biotech or big pharma for smaller are always astounding this is small given what we have seen more recently. >> i saw it and said to my team, to ben, look at that, look at that deal. it is an amazing deal. and then there is an outfit this
morning with an absolutely terrific story, asnd, see this thing? >> no. >> up $44, why they got some new drug that may be the answer to whatever. that's kind of how things go >> it is ridiculous. >> people don't even look at this okay it has phase three on -- it is a very important issue i don't mean to make light of it it has a better growth hormone than we previously had according to phase three but less side effects and people need growth hormone, we think about it as something that they doped with, the athletes what happened is that do you know that this dr. gottlieb, the head of the fda, he has approved so many more drugs than previous fda, 50 last year, which is radical, all these great ceos, look at lily, look at lily, up
130 and cut the price of insulin. but what you need to do, what you need to do is got to focus on the fact that these companies are worth buying because the fda is so easy in terms of trying to get drugs approved it costs way too much. i got to salute the fda. i work on him with some things they are approving drugs to the point where you want to make a bet and buy some of these guys that you normally -- and what you do is you buy them and write a check to charles river labs to get something approved 85% of the companies that -- >> cvr, the celgene deal will be worth something, right >> i like that deal. i know that starbucks -- >> they're doing a lot they got a lot on their plate. >> ebay, one of my great readers
says ebay is now the largest car dealer in the world. i don't know that for a fact. >> really? >> yeah. >> under meg whitman when they bought skype, trying to make it easier to buy a car. that didn't work out. >> no. >> i don't believe the breakup of -- i don't know whether they'll be on board with the breakup. >> they're examining everything. they're going to do a review of stub hub, the classifieds, all of it. that was the news from late last week. >> did you see bristol-myers last week with call buying, people -- >> stock was being bought through goldman, like 20 million shares because people wanted to be able to settle prior so they have the record date which is today? >> nothing happened. we wake up this morning and nothing happened >> no. >> bristol is too high >> we'll see a lot of people who -- on both sides of the trade worrying on some and others expecting that it may not get the vote on the 12th of april. >> i wish you would do a doc on
democracy in share holding. >> okay. >> it is so important. look at how bad -- >> didn't lend itself to doc but -- you got to think pictures >> snap is colorful, right bring in bristol, kind of free, life saving drugs. i would like to work on it with you and then we can watch on it in our basement. >> watch it and get -- >> get some popcorn. >> bob pisani on the floor now, he's got more on what's moving this morning bob? >> just off the highs, happy monday, everybody. 3 to 1 advancing to declining stocks another great start to the day dollar is moving up. transports are up. transports were down six dmazayn a row. a positive day for the transports still trade related. look at the dow movers, for example. i don't normally put them up it is all trade names. caterpillar, dow dupont, boeing, intel, 25% of the revenues from china, coke and the defensive names like mcdonald's, all kind of flattish. it is trades
but that's good enough don't -- look at the numbers now. i pointed this out at the end of last week, we're very close to historic highs again right now 2.5% from an historic high on the dow industrials. under 4% for the s&p nasdaq is 6% russell 2000 is 8.5% now based on the gains today keep an eye on that. couple hundred points away from the dow on new highs it is a global rally nice move up in china overnight. nice move up in the stocks, 600. so europe is at a five month high japan is at a three-month high we're doing well here. it is good to remind everybody what the tailwinds and headwinds are, because i think there is a little confusion about what the headwinds that we're facing are. so the tailwinds, is the fed being patient right now in terms of what is moving markets. and the china trade deal nomi l nominally positive but could go negative but global growth say problem with china and europe. i know some people think if we
get a china trade deal, the global growth story will become a tail wind. that's not necessarily the case. the strong dollar, the dollar is up again today just keep an eye on that remember something, this is the reason why we have gone to negative earnings growth slower global growth in china and europe is is why we now have gone negative in the first quarter on earnings. second quarter is heading that way. third quarter is flattish. everybody back ends growth in the fourth quarter they do this all the time in the first quarter. we're looking at 4% growth on the year a lot of people have zero% growth and it is all tied to the slowdown particularly in europe and in china if that can turn around, we can stop these downward earnings revision that's why i say give me some sense of where the global slowing story going and i can tell you where earnings are going. first, most important to get the markets moving towards s&p 3,000. and you can see this in the earnings cuts. look at the companies, the
sectors that had the biggest earnings cuts so far this year energy earlier because of the decline in oil that's now reversing that's good news materials and technology these are the two sectors that are levered most of the global economy. and those are the ones particularly in the semiconductor group, jim pointed that out, that had the biggest downward revision. if we can stop that downward revision and those two groups, we'll have a big part in slowing down the earnings declines that we have been seeing overall. as for whether that would help, jpmorgan does, this morning, they had a note out to their clients saying if trade deal materializes, it will remove uncertainty and could be a source of positive revisions, positive earnings revisions since this catalyst is mostly not in the consensus numbers the question is, the market sniffed out the trade deal story or not, but we need that certainly to stop the earnings declines here. right now, we're up 72 points on the dow. david, back to you. >> bob, thank you. bob pisani coming up, a veteran of both
law and banking and m&a who advised on more than a trillion dollars worth of transactions will weigh in on bristol-myers celgene. the wellington thing, i want to wellington thing. >> he can be in our documentary. >> that's right. as we head to break, here's a look at the movement in treasuries this morning.
canopy to discuss cannabis growth uncertain significant deal because i think concussions is going to be a huge, huge method for cannabis, cbd oil >> you've got mr. benioff. >> mr. benioff, and this is going to be a big test of whether the money is going into faang. i told you to watch faang, and it's happening. >> what a monster that stock has been for a while. >> look at apple. >> having a big day. >> and nothing other than the move to faang. >> well, it's china. >> yeah. >> come up you know what's coming up, "squawk on the street" with me and sara eisen we're back after this. the future of technology investing
lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential. good morning welcome back to "squawk on the street." i'm sara eisen here with david
faber live from post nine at the new york stock exchange. carl quintanilla has the day on assignment let's take a look at the market. stocks are up after ten straight up weeks for the dow the rally continues. it's up a quarter of a percentage point check out the nasdaq fueled by tech stocks fueled up half a percent and chinese stocks at multi-month highs. optimism over u.s./china trade deal i go away for a week and it's still the same story the market parties on on hopes of a deal. >> we start this morning with the trade optimism giving a boost to stocks this morning reports say we may be in the final stages of talks between china and the u.s. and a deal, well, it's said to be on the horizon. >> plus, criticizing the fed the president lark out at chairman jay powell deering a cpac speech. >> and a media shake-up. at&t's warner media announces significant changes in the leadership of its various divisions as it takes aim at competing on a direct-to-consumer basis with netflix. we'll begin with the story moving the markets this morning around the world
there are reports that the u.s. and china are closing in on a trade deal let's get straight to kayla tausche in washington for the latest this time there are some details, right >> reporter: there are details, we're getting closer and closer. the two sides continue to inch towards the deal with text of an agreement that has blank brackets where issues still need to be resolved president trump is meeting with his trade team today according to three sources but continues to push for a deal by the end of the month. the contours of this said deal are slowly coming into view is would you have large-scale purchases by china of u.s. goods. you would have a new foreign investment law to be passed by china's national people's congress over the next couple of weeks that would aim to protect the intellectual property and technology of non-chinese companies, though the strength of that law is currently being called into question you would also have the rollback of most tariffs and retaliation by each side which is the thing that the market likes the most there's still a question though over how the deal is going to be enforced last week the u.s. trade
representative bob lighthizer said that there would be regular dialogue at all levels of government, but the u.s. could reintroduce tariffs if china doesn't deliver, and that is not sitting well with beijing where president xi and his politburo will need to sign off on any deal the white house and abs lighthizer are trying to shore up support for its trade agenda. lighthizer is heading to detroit to meet with automakers and the auto industry and unions later this week. as theytalk about the trade agenda at large, but question, guys, that everyone has is where do you think staying with china? what's the likelihood we get a deal, and when could it happen, and we're still eyeing the end of march for that. >> so i guess if we're all trying to figure out is based on what we know at this point is how much real substantive change is there in the way china operates its industrialist policies that make it so unfair for american companies to do business >> reporter: well, industries and stakeholders in businesses have been pointing toward this
new foreign investment law that china is going to be taking up in its congress over the next couple of weeks. that is the first time that china would be introducing language aimed at actually protecting the intellectual property of foreign companies that are doing business in china and also acknowledging the presence of subsidies in state-owned enterprises, but critics say it doesn't go far enough there, and that's one thing that is trying to be worked out behind the scenes where can you actually get china to make commitments on those fronts to deliver. i think the other question is how this guess enforced. something you hear administration officials come back to time and time again that that's what will be different about this time is that there will be a new dialogue, that they will be meeting at all levels of government and regularly, and that if china doesn't follow through tariffs will come back, but specter that have and the fact that the u.s. is keeping that in its back pocket is something that has spooked investors who are hoping that this is smooth sailing from here on out. >> kayla tausche, thank you.
for more on what a possible trade deal means for the markets, we're joined by the head of u.s. equities strategy at usb c capital markets and the chief international economist at deutsche bank is here. happy monday welcome to both of you we've been wondering how much of a trade deal between the u.s. and china is priced into the markets. what does today's action tell us >> i think it tells us there's still some more room to go, that it's not fully priced in but it would be wrong to see that a lot of move we haven't been seeing this year hasn't been about trade. we noticed the s&p did seem to be moving with the trade narrative so i think there's still some more to do but a lot of it is in. >> what about earnings i mean, what does this mean for the earnings picture if we do get the trade deal >> it is a cloud that's getting very, very slowly moving away from where we've been for a while but the key word is really enforcement. is this just gone over the next few weeks or will we get back every month when china has to show up and say did you do this
and didn't you do this and did you deliver on all these promises and how do you actually check if enforcement is there on intellectual property rights how do you check if it's there or so on everything you're doing in terms of what you're promising to buy a lot of things that are suggesting that this is not going away over the next few weeks. >> meaning what, that even if there is a deal we could still be faced with the prospect of tariffs coming back but the chinese are not complying. >> the risk is what does mean to comply and what does it mean that the u.s. is satisfied with what the chinese have to deliver? that will continue to be an issue that suddenly we have an option open of any time new tariffs could come or new negotiations could come on things that weren't delivered. we expect we'll get something on the deal that will be helpful but this is a whole new agenda that will be an issue for potentially quite some time. >> what torsten is saying that details do matter, that wall street doesn't need a deal. >> there needs to be enough of a deal in place so that businesses have certainty upon which to
plan i think one of the things i noticed through this reporting season which is mercifully winding down now is we didn't see a lot of corporate overreaction there was a sent in the hit, but i didn't see that companies were changing a lot of things massively so i think we don't need complete certainty, but we need a decent amount of it. >> lori, we saw the president walk away from the north korean talks with nothing as slight as it may be, what would the market's downside be if in fact things did not proceed to a deal with china >> in terms of the trade deal itself >> yes i think it would be a pretty big blow to the market to be honest. i wouldn't necessarily expect to surpass the december 24th lows in any kind of major way, but i think you could look for a healthy move lower. >> are you saying -- does the walkaway from north korea have any implications for the china trade deal does it make it more or less likely that he wants to do a deal with china? it's hard to gain with that. >> i know, that's very
difficult. essentially political calculation. what's very important for what david is saying, is a trade deal has had a very significant impact on the global manufacturing cycle but the auto industry globally is not doing well so as long as the uncertainty persists the more i get worried that the global economic forecast has to be revised down. >> let's talk about the focus and assume we do get a deal of some kind by the end of this month. where is the market then going to start to focus? >> well, the lift is that the uncertainty is going away, but question i'm getting from clients is what's on the other side of the trade deal what are the things we'll talk about in the future once the trade deal is behind us. will we talk about the trade deal still in terms of enforcement and implications and will we talk about the underlying fundamentals, auto industry, globally, will these things start to turn around? market has rebounded but fundamental expectations and growth hasn't real rebound that much, so now as we saw last week semi-still training lower and we're seeing other indicators of
bottoming out. economic indicators have not turned around as quickly. >> do you have a thought on that another way to phrase it if the market is discounting a trade deal, what's driving the market? >> i do think there's a legitimate concern about what's the next part of the fair tifrks and i think we're in a little bit of a story vacuum that we've gotten past trade deals and earnings and the dovish fed, what are we going to talk about now? that's legit, but the idea that we've returned to this euphoric sensation in the market i don't see it, whether you're looking at retail investor sentiment on aaii we've rebounded from extreme oversold conditions, and we're neutral, nowhere near last year's peaks if you look at data positioning, we're nowhere near the peaks we saw last january. >> what about the overall market on the market? are you comfortable with where we are right now >> i think with the fed moving to the sideline, the ability for
the multiple to expand again is in place we're at 2900 and 171 on our numbers to the s&p that would take you to a 17 times trailing pe average. that's average i mean, that's nothing heroic. >> did you guys hear president trump speaking at cpac over the weekend? mentioned the fed and the fed chair again and the u.s. dollar. listen >> we have a gentleman that likes raising interest rates in the fed. we have a gentleman that loves quantitative tightening in the fed. we have a gentleman that likes a very strong dollar in the fed. i want a strong dollar, but i want a dollar that's going to be great for our country, not a dollar that's so strong that it is prohibitive for us to be dealing with other nations and taking their business. >> here we go again, torsten if this becomes a campaign strategy, a slogan for him, you know, to use the fed as a scapegoat for all things wrong with the economy, what does that
mean for the markets >> you wonder how jay powell and the fomc are thinking about this it's a really difficult situation. they would much rather look at inflation, unemployment and look at the outlook more broadly rather than being involved in any political speculation about why they are doing things and not doing things. >> particularly surprising isn't it because powell is not knew travel he's kind of doing what the president hoped he would. >> and that's the problem here he had's done exactly what in some sense trump was asking for. >> yes, but there's still tightening. >> absolutely and q2 as trump also talks about is a very important part of the cause, and also there is a significant debate about should the fed stop running down the balance sheet now, later, when this year and what is the magnitude of these things they are a very important part of fixed income debates, but it's just not particularly -- >> final word, lori. is this going to move bonds and the dollar if the president keeps talking about it, or is it just noise >> i think the dollar has been, you know, very difficult for even currency forecasters to
figure out what's driving it lately, but i would just say on the dollar it's been pretty flat we've been at the 96 and slightly plus level since august the dollar meanders and by the end of the year won't be strengthening year over year anymore and the stronger argument that the dollar is hurting profitability will start to recede. >> see if that happens thank you both >> when we come back, a streaming mission. at&t announcing a restructuring at warner media as it looks to take on netflix with a direct consumer offering of its own pulitzer prize winning columnist jim stewart will be here we'll talk to him about that later, a major bristol-myers shareholder announceard its opposition to the celgene deal federal banker and lawyer jim woolery who has advised an $1 trillion worth of transactions he'll weigh in on what he esse as a turning point for corporate governance this is your invitation to a higher standard of luxury.
internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. this week kicks off focus on the retail sector. friday's job number also playing into expectations for what's ahead for these companies. so far the sector modestly outpacing the s&p 500 this year. meanwhile amazon signaling fresh attacks on the grocery companies with the announcement of its own urban grocery stores weighing in on all of this right now is former jc penney ceo and head of apple retail ron johnsson currently runs enjoy.com welcome back great to see you. >> great to be here. nice to see you.
>> among names reporting this week are costco and kroger both had a fresh hit off that "wall street journal" report at the end of last week that amazon is looking to open grocery stores outside of whole food not sure how much of a surprise that is, but how much of a threat is it to the traditional grocers? >> well, i think it's a big threat amazon from the outside appears like they have been working on the grocery business for a few years now. step one was to acquire hold foods. i think they did that, and not just to learn about grocery, but to gain access to america's pest supply chain for fresh produce and perishables. they have that and have been building that up then they rolled out their amazon go stores which have talked about convenience foods which are really important to grocery and also about eliminating checkout and if amazon can pull off a grocery store without checkout, everyone has to watch out because that will be game-changing. >> but at the same time, ron, it's not like these companies have been sitting still.
names like kroger have been investing heavily in digital efforts and warehouse companies like akado trying to build that out in the u.s it feels like this battle is far from won. >> yeah. amazon is going to have to work really hard. it's going to take a decade or more to build a great grocery business, but they are really good at commodity basics that they can feed on good operations and low prices that's why they have won online and been so successful over time people learn to compete with them. best buy learned to compete with them and target has learned to compete and walmart has learned to compete now they are coming in with a great balance sheet and a lot of technology, and i think they are going to be a real force in grocery. >> what would you be watching in terms of earnings? we're going to get a bunch more this week? i mean all over the map, but in terms of some of these digital efforts and what is working, you know. walmart continues to show tremendous double digit e-commerce growth and who is
successfully countering amazon >> well, i think it will be fun to watch target. i think they report tomorrow target obviously reported their sales. they had a great sales quarter it will be interesting to see how that translates into profit. they are investing a lot in a variety of delivery functions which can be very expensive. their e-commerce is growing fast it will be interesting to see how the profitability comes into play but i expect brian core knell and the team will be very on theist about the year ahead with the consumer being strong and with the momentum that they have i think they are interesting i think costco will be interesting at well, but it's been kind of an expected earnings season to me. most of the companies we expected to do well like walmart and target have done well and nordstrom did well the companies we expected to struggle a little bit like macy's and jc penney and the gap. they continue to struggle so kind of the winners and the also rans are really being clearly separated at this time in the
retail marketplace >> yeah. you know, ron. we've come back to this team of the decline of the mall many times. children's place reported this morning disappointed i think it is a same store sales numbers and the stock is down. >> right. >> there it is 11%. >> but it's hard to tell some things are still hanging in there in the mall. is there an overall theme that's still sort of in place in terms of the decline >> the key to remember about the malls, there are thousands of malls but no two malls are the same the second-tier malls are really struggling, and that's where children's place and gymboree had and the gap had their 500 to 1,000 stores but the top-tier malls have never been busier. i live near stanford shopping mall in palo alto and that's the hardest place to get a parking spot and people are flocking to the malls that are well positioned i think there are great malls
with new tennants, new categories and new things to do, a lot of food, and then you have the also-rans that are really struggling, where sears is closing and jc penny is leaving and macy's is closing and a lot of companies are having trouble so the mall story is really a tale of two different types of malls. >> yeah. i mean, so you mentioned gap as part of that story we're all still digesting the big split. market liked it. what does that tell us about the state of retail, either the weakness in gap or the strength in old navy. >> well, i think what it says is old navy has had a great competitive position for nearly three decades, and they have got a nice set of merchandise at great value for young families, and if you peel the young families you do pretty well. i think the gap board and the gap was tired of having banana and the gap drag it down, and they decided to separate those two and the market liked it because now they can clearly value the faster growing old navy and make a decision on how the gap should be repositioned
with its core brands that it has. so it's probably an interesting business move for the gap. >> yeah. i wonder if it also says something about where the consumer is right now in terms of price points because it's no coincidence that gap has a lower price point. it's part of the brand identity, and you also see off-price sellers like tj maax which owns marshall's and home goods doing very well in this sort of consumer environment. >> yeah, there's clearly -- it's just like the economy. there are well off people and people that are struggling the stores that cater to affluent customers are doing well the stores that cater to lower priced customers are doing well. its people in the middle that are struggling, and that's that traditional department store that's a lot of these middle american stores that are really struggling. >> finally, ron, just quickly, i don't think we've talked to you since your successor angela aire ahrens is out as retail chief,
and the fact that thee is out and they have used the hr chief to replace her. >> i don't know why the new change i do know the new person deidre o'brien is a great leader. she led all the operations back in the relaunch in 2000. she's a great person, a really good operator. i think they will love her so i don't have any insight that you don't have, but i expect great things from apple. i expect great things from the retail stores in the years ahead. >> ron johnsson. thank you very much. the former retail head of apple. >> thank you >> also former head of jc penney. as we head to a quick break, let's check on the major averages at this hour. losing some steam but still positive across the board. dow up 36 and nasdaq is the big winner, up almost half a percent. a look at the top performing stocks right now on the s&p 500 as well. "squawk on the street" will be right back -driverless cars... -all ground personnel...
and expressed concerns over a strong greenback looked like he would get his wish i get not so much. >> look at the etf, the uup, the invesco db bullish dollar and basically tracks the u.s. dollar index futures. this is a five year look i think it made sense to give it a longer term range that the dollar has been trading in yes, we're at upper end of it lately but not new highs from a couple of weeks ago. also have a look from the same etf from the election so from the date of the 2016 presidential election, and interestingly we're about florida. i mean, you've had obviously a little bit of an uptick after the election and then we declined and now we're right back near the highs, but net-net it hasn't necessarily been as if the dollar has been a major headwind for the u.s. economy. obviously this goes along with the president's criticism of fed chair powell for raising interest rates and essentially trying to perhaps maybe slow or moderate the growth of the
economy, sara, so it's kind of interesting that it's still getting targeted as a potential villain and most presidents don't want or confess to wanting a weak dollar. >> true, but i will say to the president's credit, a lot of companies who reported earnings this season did complain about the strength of the dollar. >> absolutely. >> we saw companies like hope where it really slashed some of the outlook. when it comes to the company views, they take a shorter term horizon. >> and mention it mostly when it's been a net negative. >> right. >> yeah. >> you never hear it as a positive. >> i do think that it's probably true if the point was, look, the economy would be that much stronger if in fact we didn't have higher rates and a stronger dollar perhaps that's the case. it's not as if the dollar has been soaring to new highs, and, therefore, that's been somehow a major swing factor for what the economy has been up to. >> a very good major etf spotlight. >> 10 out of 10. >> usually i ask what's in that? because i actually -- it's
always interesting. >> the dollar. >> when we come back, yes, he's won a pulitzer prize but we really appreciate him more for his sartorial splendor he'll weigh oinn the at&t shake-up at warner media eson the treat is right back at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got
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good morning, everyone i'm sue herera here's your cnbc news update at this hour. south korea proposing three-way talks with the u.s. and north korea as it struggles to put nuclear diplomacy on track after the failed summit between president trump and north korean leader kim jong-un the proposal came during a national security council meeting led by south korean president moon jae-in. at least 23 people were killed and dozens more injured in alabama yesterday after two tornadoes tore through the eastern part of that state
one alabama sheriff describing the damage as massive. thousands of people in the northeast waking up this morning to brutal commutes, school closures and power outages after a winter storm dumped up to a foot of snow in some areas more than 700 domestic flights have been cancelled. and former colorado democratic governor john hickenlooper is throwing his hat in the ring announcing that he'll run for president in 2020. in a video released this morning, hickenlooper says that his campaign will center on taking action on key issues like guns and climate change. you're up to date. that's the news update this hour guys, i'll send it back downtown to you. >> okay. and i'll take it thank you, sue at&t's warner media announcing a new organizational model on leadership team this morning with a renewed focus on content development. this just days after hbo's richard plepler announced he would step down as the man running that division. among the changes robert
greenblatt shares the direct-to-consumer division, jeff zucker adds oversight to live sports as chairman of the news and sports divisions as well with us at post nine, pulitzer prize winning "new york times" columnist jim stewart. nice to have you. >> good to be here >> people want to play, of course, as the telephone guys taking over the entertainment company, the culture clashes, but to be fair, of course, zucker is not a telephone green andgreenblatt is not a telephone guy and tsujihara who runs the studio is not a telephone guy. >> i've seen this so many times, a big company takes over another one, especially if there's media or entertainment or some kind of other creative element, we're not going to let it continue doing the great work that it's been doing here the court of appeals had barely ruled when all of a sudden, you know, the news was out there they are restructuring and the very creative people who led these divisions to great successes were now out so i think there's -- the big question is as you put it is the
bureaucratic giant going to smother the wildly creative things that they just built? you're right bob greenblatt has tremendous respect in the entertainment community so they have moved in a good direction, but we don't know, you know, what was said. i think we're going to have to wait and see, and i think, you know, a fascinating example is hbo's airing of this very controversial michael jackson documentary, very disturbing but, you know, clearly very acclaimed from artistic and news perspectives, and they are getting sued for $100 million by the jackson estate is this the kind of thing that at&t will be willing to stand up for? to their credit they are going ahead and they are doing it and that will send an encouraging sign, but that's exactly the kind of issue that people will want to see, the at&t not just talks the talk but walks the walk. >> it's not as though there's not a lot riding on it not a small acquisition that we're talking about. this is a major significant deal that at&t has finally gotten
fully approved and financially a company with what was $180 billion worth of debt needs to continue to be growth assets to continue to keep a good relationship with its bond holders. >> yeah. i think stankey has been focusing on the traditional companies, companies behind the big silicon valley companies here and that makes a lot of sense to move in that direction. at the same time, these are fragile enterprises. they are creative enterprises. everybody is going to be super attentive for any message, the wrong kind of message right now. >> again, i also think, you know, people haven't made paid quite enough of attention to the court of appeals opinion that's a -- this was a major test of antitrust theory there were many people, not just president trump trying to block this deal, but especially, you know, antitrust experts and economists over on the left side of the political spectrum who
were arguing that big is bad we can't have these vertical mergers. the court of appeals gave that very short shrift. it was a very definitive and emphatic opinion that we are not going to intervene in a big vertical merger, even if it is in this sort of media and entertainment space. >> have you seen jean mayer's story in the "new yorker" that's out this morning and points directly to president trump numerous time deplorg gary cohn and others to block the deal, something, of course, we have opined about for quite some time when initially the doj and the man who runs antitrust decided to try to block it. >> it's fascinating to see the evidence behind that, because, you know, as we should know by now, the chief executive, the white house, is not supposed to be interfering with law enforcement period but specifically with antitrust policy, but, you know, if there's something heartening that he said here, and i thought this when i read the court opinion, you know, we have very
strong independent judiciary here and, you know, all of his efforts and mustering the antitrust division didn't do any good i mean, we have an independent court system who clearly ruled this should go through didn't say anything about the political implications, and i think that's very heartening for our system of government. >> it's always interesting to debate what this company is going to look like and what the culture is going to be and what the future of hbo, and but for the stock it's been a loser. it's down 16% over the past 12 months what do you think wall street needs to see to make it work >> well, i think they want to see revenue growth and profits i mean, it's all about profits it's all about looking down the road i think at&t, you know, felt they had like no choice but to move in this direction i think wall street has been very troubled by, for example, the directv results which seem to be deteriorating. >> they are not just seen as they are. >> they are, yeah. that actually argues in favor of what at&t did. they had to come up with a new
strategy, that one, you know, just staying on top of the distribution channels does not seem to be working in an age of digital upheaval, so i think, you know, long term they have made a -- the right decision here but wall street isn't looking. i think they are looking near and medium term. there's going to be a j-curve here there's going to be a lot of investment cause it will take time before you see whether this strategy plays out or not, and, again, i was looking at their efforts to sort of optimize digital content and i think that's really good the problem is at&t nor time warner, they don't really have the expertise in that area silicon valley is way ahead of them they have thousands and thousands of software engineers who have been doing this now for, you know, a decade. it's going to be tough to catch up with that it's a little bit like i think, you know, the disney situation can they handle the distribution side of the challenge in the digital age? when netflix is way ahead on this these are fascinating questions. i don't know the answer.
i give them credit for trying to do it, but it's going to be a tough battle, and i think wall street is skeptical. >> yeah. it's a tough battle, one that many would argue that they have to do. >> i think they have to do it. >> not as if the current businesses will be there in the same robust way it has been. >> jim, stay with us another take on a story you've reported on. tesla planning to unveil its new model next week. phil lebeau has all the details, not giving much encouragement to wall street. >> no. the stock is down. elon musk announcing the model y will be unveiled at an event in california and did it the way elon musk usually makes announcements via twitter. in his tweet yesterday he said the model y being an suv is about 10% bigger than the model 3 so it will cost about 10% more and have slightly less range for the same battery what's been the reaction of analysts at rb capital saying while we suspect thiscould be
very good and in-demand product we view the timing of the announcement as more fodder for the bears and being a positive catalyst for the stock ben callow at baird had a different perspective saying we think the continued increase in tesla's product offerings could be a key driver of top line growth keep in mind, there's a couple other big stories going on with tesla over the next week at least if not longer into the future first of all, the feds are probing nhtsa, probing tesla crashes as well as the autonomous drive technology that's being used, and we expect within a week we know that elon musk has to answer the s.e.c. and its belief that he should be held in contempt of court. as you take a lookof shares of tesla again. under pressure today guys, this could be a busy week next week if we get a response to the s.e.c. from elon musk and then you have the event coming up a week from wednesday or a woke from thursday in california that's where they are going to be showing us the model y. say what you will, guys.
these event where he shows new vehicles, they really get the -- the tesla supporters going he is a master marketer in that regard >> yes, he is. phil, thank you. phil lebeau on the latest with tesla, jim i assume you're waiting for the s.e.c. announcement. >> well, yeah. i mean, frankly, i was kind of crestfallen when i saw this happen after all that tesla went through and that musk went through and the upheavals at his early, you know, impulsive tweeting caused, that he would do this again without going the simple step of getting, you know, his general counsel to approve it who now has quit. i think this is more than just is musk thumbing his nose at the regulators which on some level i guess he is, but, you know, my feeling is if he's the mast every marketer, and he is in many ways, why isn't he relentlessly focusing on product quality and efficiency of production at this particular time because i think these personality issues are starting to spill over into sales
i mean, i know people who talked who would love to get a tesla who are starting to say i don't want to buy a car from a company that may not be here in five or ten years, and -- and there's growing skepticism in the bond market the mounting debt and -- and it doesn't inspire customer confidence when you have the driving force behind a company who i'm the first to acknowledge has accomplished great things here nevertheless, picking these needless fights with regulators that have got to be distracting from his primary function and raise legitimate questions about whether this is going to be a surviving enterprise, and i think we were talking about a car company. people are looking at a multi--year investment they want to know if the service is going to be there and the parts are going to be down the road and this is simply putting cloud over all of that. >> and the stock has reversed this morning after being up and after a particularly poor day on friday at least if you were along. jim, thank you. >> my pleasure. >> jim stewart. up next, opposing the deal bristol-myers, one of its largest institutional
shareholders, wellington, last week pubically coming out against bmy's plan to support celgene. corporate governance expert jim woolley will explainhy w this is an historic moment for major active shareholders next cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪ you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse.
in what was an extremely unusual move last week, major institutional shareholder wellington came out against bristol-myers' plan to purchase celgene six weeks ahead of a shareholder vote on that deal. my next guest says a move like this from such a significant shareholder and size and in sort of prestige, well, it's unprecedented, and it could serve as a wake-up call for
corporate america. jim woolery is head of king & spaulding's m & a governor nan bracket and has advised on $1 trillion worth of transactions, focused on governance, and that important conversation that goes on between boards and their shareholders why was wellington's move last week, jim, of such significance? >> david, you and i have been doing this and have been having this conversation for a long time when you started reporting, it took you 40 holders to get to 40% of the stock of the public company. today it takes you eight, eight. think about that eight holders. three of those are passive index funds that hold over 20% of the stock of every u.s. company. >> vanguard and blackrock, of course. >> right and another five inactives so those five holders will dictate the outcome of pretty much any vote in the united states, and that's a new phenomenon we haven't been in that situation before, and you also have this battle between the actives around the passives, so if you look and follow the
money, if you look since 2006, the active -- the passive etfs have dominated on revenue generation versus the actives, so the actives are now saying, look, we need to demonstrate our influence. we charge more than an etf we have a human being who picks stocks who does research, and we want to have that influence. here in the bristol deal, which they are entitled to vote how they want, but they didn't just vote, they jumped ahead to the beginning of the process they tried to be new hampshire and dictate the outcome of what was going to happen, and it's unfortunate that when they do that, it's a two-paragraph statement. they don't take phone calls. there's no due process, and frankly that's really not fair to the other holders or to bristol or celgene. >> in terms of entering into the debate, if you will, because to your point i try to follow wellington got nothing even submitted questions via e-mail and got nothing, but why is it so significant i mean, people may not know
wellington well. it's a very large firm, of course, but typically these kind of shareholders don't say anything, right? they never do, but we've been building for this for five years so in order for wellington to do what they did, the compliance in legal review that they had to put in place, the infrastructure and the them they have added, they are going to do this again, david. the active managers have to in their view fight back. in fact, you see a quote from newburgher who made a settlement on the ashland situation where they said, look, we do the research we do the work we don't want to give the vote just to these three index funds, and so we're going to jump out and we're going to be very, very vocal, and that dynamic has big implications for every company who is going to do a deal or is going to make a major decision you'll have to engage with these holders in a much different way. you have to understand the politics between them, so it used to be a one-way conversation why is this deal good for
bristol shareholders and celgene holders? today it's a question of why is it good for those folks, and why is it good for wellington's holders? okay, and the wellington holders or the etf holders, they don't have a lot of influence on how wellington votes, so we've got a dynamic here where the s.e.c. is looking at this. we know they are looking at it the and jay clayton is a great head of the s.e.c. >> they keep looking at what >> they are looking at the concentration of vote. asset management dramatically favors scale next year there are going to be five or six holders who will control everything i mean, is blackrock, they have 6 trillion today. >> they will be the deciding vote. >> they will only 20% of every company in the united states what does that mean? are we ready for that, and i don't think the s.e.c. is ready for that they are studying it, but this needs to move up their agenda. the 13d rules were devised for bruce wasserstein and t. boone pickens. >> and we've been in an environment where names we know,
elliott or third point or carl icahn have typically given voice through their actions to some of these shareholders who remain quiet. that's no longer going to be the case either? >> i don't think so, but i think you will see actives partner they will be a swing vote. they will vote they'll partner with activists when they think it makes sense, with the company when it makes sense, they're going to take some prominence from activism and take some from etfs. they don't like the world where on one hand you have jeff smith and the other hand blackrock and nothing in between. >> bottom line it on how you're going to change the conversations with ceos, considering doing a deal that hasn't been socialized in the marketplace or is going to come out of left field. how does that conversation differ now than it did a few years ago? >> traditional investor relations was not a strategic position, now it is. ceos have to have a deep relationship with top holders.
8 or 9 people in effect that will control the destiny of a company. that ceo has to know those folks like he or show knows the top 8 customers. >> does it make it less likely they do the big deal >> makes it less likely they do anything that's a surprise anything that's big and surprising, it was always hard as you know. it just got a lot harder i think without the proper signaling or some type of direction being given to the shareholder base, you catch the shareholder base by surprise, this is the kind of thing that can happen. >> jim, we're going to stay on it i think the particular issue is the other one you raised, blackrock having so much power a conversation for another day but very important. >> this is not boys just this deal, this is about the next 100 deals. we're going to be in this state for the next ten years so the reality is we're going to start talking about a different conversation these shareholders will be at the table and we'll have to deal with them. >> thanks, jim
sara, over to you. >> thanks, david. let's send it to jon fortt with a look at what's coming up on "squawk alley." good morning, jon. >> good morning. greg clark, ceo of semantic joins us from the rsa security conference, important in the age of cloud how we secure all those devices, end points. "squawk alley" is coming up. the future of technology investing lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit.
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welcome back to "squawk on the street." leslie picker. stocks are higher, well off the best levels of the session health care stocks pulling the s&p lower after the industry posted the best week since early january. among names dragging the group lower, cardinal help, united health, cigna. back downtown to you guys. >> and i will take it, thank you, leslie picker it is that exciting time you were gone, i missed it sara, what is coming up on "closing bell" >> we're talking to goldman, sachs jeff currie to forecast what's up next with oil. crude is double what the s&p 500 is up. continuing to climb again today,
1.5% earnings, sales force reports after the bell, bring instant reaction and analysis. later on the network, sales force marc benioff on with jim for "mad money." that stock has been a huge winner see if it can continue that streak. >> headed that way myself. >> san francisco >> lot of news out there >> you going to tell us why? >> not yet i'll be reporting from there as well "squawk alley" is next you don't want to miss that. don't go away.
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good monday morning. welcome with to "squawk alley. i am jon fortt morgan brennan and sara eisen live from the floor of the new york stock exchange. carl is on assignment. we begin this morning with amazon shares up 2% as evercore raises a price target on the stock, citing gross profit as a more important metric than revenue, taking it under $2,000 a share meantime, amazon's announcement of the new grocery venture sending names like kroger and walmart lower last week. this as "new york times" publishes a profile of amazon's chief executive, how jeff bezos went t